By Andrew Welsch

In the competition between active management and passive index funds, chalk another one up for passive. Just 31% of U.S. stock-pickers beat their comparable passive funds for the 12-month period ending June 30, according to a new report from Morningstar. That's a significant downtick from 44% a year earlier, Morningstar says.

Among U.S. stocks, active managers' long-term struggles have been most acute in the large-cap category; only 8% of actively managed large-cap U.S. stock funds beat their average passive rival over the decade through June 2025, according to Morningstar's Active/Passive Barometer report. That compares with success rates of 18% and 25% for active mid- and small-cap managers, respectively, the research company says.

"Active large-growth strategies have had a particularly hard time delivering value for investors," Morningstar's report says. Many of them have ceased to exist as assets have fled underperforming funds. "Of the active funds that existed in this category two decades ago, nearly 65% closed, and just 1% managed to outperform their average indexed peer."

International stock pickers have performed better than their U.S. stock picking peers, with 41% of active managers who oversee global or foreign stock portfolios beating passive funds for the period July 2024 through June 2025. But a better success rate hasn't been enough to attract investors dollars and keep these funds up and running. The category's 10-year survivorship rate, at 40%, ranked the lowest among all categories tested, according to Morningstar.

Actively managed bond funds, which are generally considered to have better odds of beating their comparable index, have stumbled, according to Morningstar. Active bond managers' success rates plummeted 31 percentage points to 31% for the 12 months through June 2025.

Active bond fund managers have fared better over the long haul. "Fixed income has been a fertile hunting ground for active managers," Morningstar's report says. "Over the past decade, 42% survived and beat their average passive peer."

Because of the challenges of beating passive funds, investors have increasingly favored passive funds over active. Total assets in passive strategies surpassed assets in active strategies at the end of 2023.

Write to Andrew Welsch at andrew.welsch@barrons.com

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August 07, 2025 11:01 ET (15:01 GMT)

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